UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

Trex Company, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

TREX COMPANY, INC.

160 Exeter Drive

Winchester, Virginia 22603-8605

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

May 1, 20136, 2015

To our stockholders:

Notice is hereby given that the 20132015 annual meeting of stockholders of Trex Company, Inc. will be held at The George Washington Grand Hotel, 103 East Piccadilly Street, Winchester, Virginia, on Wednesday, May 1, 2013,6, 2015, at 9:00 a.m., local time, for the following purposes:

Only stockholders of record at the close of business on March 4, 201310, 2015 will be entitled to notice of and to vote at the annual meeting or any adjournment or postponement thereof.

All stockholders are cordially invited to attend this meeting.

We have elected to adopt the Securities and Exchange Commission rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing a Notice Regarding the Availability of Proxy Materials (the “Notice of Availability”) to our stockholders instead of a paper copy of this proxy statement and our 20122014 Annual Report. The Notice of Availability contains instructions on how to access and review those documents over the Internet. We believe that this process will allow us to provide our stockholders with the information they need in a more timely manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. Stockholders who receive a Notice of Availability by mail and would like to receive a printed copy of our proxy materials, should follow the instructions for requesting such materials included on the Notice of Availability.

Your vote is very important to us.Whether or not you plan to attend the meeting in person, your shares should be represented and voted. To vote, please complete and return your proxy card, or vote by telephone or via the Internet by following the instructions on your Notice of Availability. Returning a proxy card or otherwise submitting your proxy does not deprive you of your right to attend the Annual Meeting and vote in person.

By Order of the Board of Directors,

William R. Gupp

Chief Administrative Officer,Senior Vice President, General

Counsel and Secretary

Dated: March 22, 201327, 2015

TREX COMPANY, INC.

160 Exeter Drive

Winchester, Virginia 22603-8605

Annual Meeting of Stockholders

May 1, 20136, 2015

PROXY STATEMENT

GENERAL INFORMATION

Proxy Solicitation

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Trex Company, Inc. (“the Company”(the “Company”) for use at the Company’s 20132015 annual meeting of stockholders to be held at The George Washington Grand Hotel, 103 East Piccadilly Street, Winchester, Virginia, on Wednesday, May 1, 2013,6, 2015 at 9:00 a.m., local time. The purpose of the annual meeting and the matters to be acted upon are set forth in the accompanying notice of annual meeting.

Record Date and Voting Securities

Only stockholders of record at the close of business on March 4, 2013,10, 2015, the record date for the annual meeting (the “record date”), will be entitled to notice of and to vote at the annual meeting. As of the record date, we had 17,185,40832,080,374 shares of common stock outstanding, which are our only securities entitled to vote at the annual meeting. Each share of common stock is entitled to one vote.

A list of stockholders entitled to vote at the annual meeting will be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of ten days before the meeting at the Company’s offices at 160 Exeter Drive, Winchester, Virginia, and at the time and place of the meeting during the whole time of the meeting.

Electronic Notice and Mailing

Notice of the Company’s annual meeting was mailed on or about March 22, 201327, 2015 to all stockholders as of the record date.

Those stockholders entitled to vote may vote their shares via the Proxy Card, or via the Internet, telephone or mail, following the instructions printed on the Notice of Availability.

Stockholders who receive a Notice of Availability and would like to receive a printed copy of our proxy materials should follow the instructions for requesting such materials included in the Notice of Availability.

From the date of the mailing of the Notice of Availability until the conclusion of the annual meeting, all of the proxy materials will be accessible on the Company’s web sitewebsite at www.trex.com/2013proxy.2015proxy.

Revocability of Proxies

Stockholders who execute proxies may revoke them by giving written notice to our Corporate Secretary any time before such proxies are voted. Attendance at the annual meeting shall not have the effect of revoking a proxy unless the stockholder so attending shall, in writing, so notify the Secretary of the annual meeting at any time prior to the voting of the proxy at the annual meeting.

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Other Matters

The Board does not know of any matter that is expected to be presented for consideration at the annual meeting, other than the election of directors, a stockholdernon-binding advisory vote on the compensation of our named executive officers, the approval of the material terms for performance-based equity awards underpayment of annual cash incentive compensation to permit the Trex Company, Inc. 2005 Stock Incentive Plancompensation paid pursuant to qualify such awardsmaterial terms to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code, and ratification of the appointment of our independent registered public accounting firm for the current fiscal year. However, if other matters properly come before the annual meeting, the persons named in the accompanying proxy intend to vote thereon in accordance with their judgment.

Solicitation Expenses

We are not engaging any company for the purpose of proxy solicitation in conjunction with this proxy statement. We will bear the cost of the annual meeting and the cost of soliciting proxies, including the cost of mailing any proxy materials. In addition to solicitation by mail, our directors, officers and regular employees (who will not be specifically compensated for such services) may solicit proxies by telephone or otherwise. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to forward proxies and proxy material to their principals, and we will reimburse them for their expenses. In addition, we have retained Broadridge Financial Solutions, Inc., or Broadridge, to assist in the mailing, collection, and administration of the proxy.

The annual report to stockholders and the 20122014 Annual Report on Form 10-K are not proxy soliciting materials.

Voting Procedures; Abstentions; Broker Voting

All proxies received pursuant to this solicitation will be voted except as to matters where authority to vote is specifically withheld and, wherewithheld. Where a choice is specified as to the proposal, theyproxies will be voted in accordance with such specification. If no instructions are given, the persons named in the proxy solicited by our Board intend to vote:

A majority of the outstanding shares of common stock entitled to vote on the record date, whether present in person or represented by proxy, will constitute a quorum for the transaction of business at the annual meeting and any adjournment or postponement thereof. Abstentions and broker non-votes (which occur with respect to any proposal when a broker holds shares of a customer in its name and is not permitted to vote on that proposal without instruction from the beneficial owner of the shares and no instruction is given) will be counted as present or represented for purposes of establishing a quorum for the transaction of business.

Abstentions and broker non-votes will have no effect on the election of directors, which is by plurality of the votes cast in person or by proxy. Brokers may vote their shares in favor of directors so long as they have voting instructions from the beneficial owners of the shares.

Approval, on a non-binding advisory basis, of the compensation of our named executive officers and the approval of material terms for performance-based equity awards under the Trex Company, Inc. 2005 Stock Incentive Plan to qualify such

awards as performance-based compensation under Section 162(m) of the Internal Revenue Code requirerequires the affirmative vote of the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote on the matter at the annual meeting. Abstentions from voting on these proposalsthis proposal will have the same effect as a vote against these proposals.this proposal. Brokers may vote their shares on these proposalsthis proposal so long as

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they have voting instructions from the beneficial owners of the shares. Broker non-votes will not be treated as votes cast on these matters,this matter, and therefore will not have any effect on determining the outcome. As disclosed later in this proxy statement, the vote on approval of the compensation of our named executive officers is advisory, and therefore not binding on the Company, the Compensation Committee or our Board.

Approval of the material terms for payment of annual cash incentive compensation to permit the compensation paid pursuant to such material terms to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code requires the affirmative vote of the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote on the matter at the annual meeting. Abstentions from voting on this proposal will have the same effect as a vote against this proposal. Brokers may vote their shares on this proposal so long as they have voting instructions from the beneficial owners of the shares. Broker non-votes will not be treated as votes cast on this matter, and therefore will not have any effect on determining the outcome.

Approval of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2015 fiscal year requires the affirmative vote of the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote on the matter at the annual meeting. Abstentions from voting on this proposal will have the same effect as a vote against this proposal. Broker non-votes will not be treated as votes cast on this matter, and therefore will not have any effect on determining the outcome.

EXECUTIVE OFFICERS

See “Executive Officers and Directors” in Part I, Item 1 of our 2014 Annual Report on Form 10-K for the information about our executive officers, which is incorporated herein by reference.

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SECURITY OWNERSHIP

The following table presents, as of March 4, 2013,10, 2015, information based upon the Company’s records and filings with the SEC regarding beneficial ownership of its common stock by the following persons:

As of March 4, 2013,10, 2015, there were 17,185,40832,080,374 shares of common stock outstanding.

The following information has been presented in accordance with SEC rules and is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules, beneficial ownership of a class of capital stock as of any date includes any shares of such class as to which a person, directly or indirectly, has or shares voting power or investment power as of such date and also any shares as to which a person has the right to acquire such voting or investment power as of or within 60 days after such date through the exercise of any stock option, warrant or other right, without regard to whether such right expires before the end of such 60-day period or continues thereafter. If two or more persons share voting power or investment power with respect to specific securities, all of such persons may be deemed to be the beneficial owners of such securities.

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shares as to which such person has the right to acquire voting or investment power as of or within 60 days after March 4, 2013.10, 2015. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, the Company believes that the beneficial owners of the Company’s common stock listed in the table have sole voting and investment power with respect to the shares shown.

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ELECTION OF DIRECTORS

(Proposal 1)

Nominees for Election as Directors

The Company’s certificate of incorporation provides that the Board is to be divided into three classes of directors, with the classes to be as nearly equal in number as possible. The current terms of office of the three current classes of directors expire at this annual meeting, at the annual meeting of stockholders in 20142016 and at the annual meeting of stockholders in 2015,2017, respectively. Upon the expiration of the term of office of each class, the nominees for such class will be elected for a term of three years to succeed the directors whose terms of office expire.

In accordance with the recommendation of the Nominating/Corporate Governance Committee, Paul A. Brunner, Michael F. GoldenFrank H. Merlotti, Jr. and Richard E. PoseyPatricia B. Robinson have been nominated by the Board for election to the class with a three-year term that will expire at the annual meeting of stockholders in 2016.2018. These nominees are incumbent directors. Mr. BrunnerMerlotti has served on the Board since his appointment as a director in February 2003. Mr. Golden2006, and Ms. Robinson has served on the Board since hisher appointment as a director in February 2013.November 2000.

Paul H. Brunner retired from the Board on April 30, 2014. Mr. Posey hasBrunner had served on the Board since his appointment as a director in May 2009.

On February 12, 2013, William F. Andrews, whose current term of service on the Board expires on the date of this annual meeting, informed the Board of his decision not to stand for re-election. The number of authorized directors of the Company is currently set at eight. Immediately following the annual meeting, as a result of Mr. Andrew’s decision not to stand for re-election, the number of authorized directors will be reduced to seven.2003.

Approval of Nominees

Approval of the nominees requires the affirmative vote of a plurality of the votes cast at the annual meeting. Abstentions and broker non-votes will have no effect on the election of directors, which is by plurality of the votes cast in person or by proxy. Brokers may vote their shares in favor of directors so long as they have voting instructions from the beneficial owners of the shares. Unless authority to do so is withheld, it is the intention of the persons named in the proxy to vote such proxy FOR the election of each of the nominees. If any of the nominees should become unable or unwilling to serve as a director, the persons named in the proxy intend to vote for the election of such substitute nominee for director as the Board may recommend. It is not anticipated that any of the nominees will be unable or unwilling to serve as a director.

The Board unanimously recommends that the stockholders of the Company vote FOR the election of the nominees to serve as directors.

Information About Nominees and Continuing Directors

Biographical information concerning each of the nominees and each of the directors continuing in office is presented below.

Nominees for Election for Three-Year Terms

Paul A. BrunnerFrank H. Merlotti, Jr. is retired. He served as President and Chief Executive Officer of Spring Capitalthe Coalesse business unit of Steelcase, Inc., a merchant bank, which he foundedmanufacturer of office furniture and furniture systems, from October 2006 until his retirement in 1985. From 1982 to 1985,September 2013, and as President of Steelcase North America from September 2002 through September 2006. Mr. BrunnerMerlotti served as President and Chief Executive Officer of U.S. Operations of Asea-Brown Boveri, a multi-national Swiss manufacturer of high technology products. In 1967, he

joined Crouse Hinds Company,G&T Industries, a manufacturer and distributor of electronicsfabricated foam and electronic equipment,soft-surface materials for the marine, office furniture and commercial building industries, from August 1999 to September 2002. From 1991 through 1982 held various positions with that company, including1999, Mr. Merlotti served as President and Chief OperatingExecutive Officer Executive Vice President of Operations, Vice President of Finance and Treasurer, and Director of Mergers and Acquisitions.Metropolitan Furniture Company, a Steelcase Design Partnership company. From 1985 through 1990, Mr. BrunnerMerlotti served as a directorGeneral Manager of Johnson Controls, Inc. from 1983 through 2007, and as Chairmanthe Business Furniture Division of its Audit Committee from 1989G&T Industries.

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Mr. Merlotti was appointed to 2005. From 1959 to 1967, he worked for Coopers & Lybrand, an international accounting firm, as an audit supervisor. Mr. Brunner is a Certified Public Accountant. He received a B.S. degreethe Board in accounting from the University of Buenos Aires and an M.B.A. degree in management from Syracuse University.

Mr. Brunner was nominated by the Nominating/Corporate Governance Committee in 2003February 2006 and renominated this year specifically due to his professional experience as a Certified Public Accountantchief executive of a consumer product company, and his past involvement as Chairmanexperience in sales and marketing of Johnson Controls, Inc.’s Audit Committee. In addition,consumer products. As a consumer products company where sales and marketing efforts are critical to its success, the Committee believed he would benefitBoard believes this is important experience to have on the Board.

Patricia B. Robinson has been an independent consultant since 1999. From 1977 to 1998, Ms. Robinson served in a variety of positions with Mead Corporation, a forest products company, including President of Mead School and Office Products, Vice President of Corporate Strategy and Planning, President of Gilbert Paper, Plant Manager of a specialty machinery facility and Product Manager for new packaging product introductions. She received a B.A. degree in economics from Duke University and a M.B.A. degree from the Darden School at the University of Virginia.

Ms. Robinson was appointed to the Board in servingNovember 2000 as Chairmanone of the Audit Committee.first outside independent directors of the Company and renominated this year due to her professional experience as a President of a consumer products company and her experience with strategic planning and new product introductions. As a consumer products company that continues to innovate with new products, the Board believes this is important experience to have on the Board.

Directors Whose Terms Expire in 2016

Michael F. Golden currently servesis retired. He served as Co-Vice Chairman of the Board of DirectorsPresident and Chief Executive Officer of Smith and Wesson Holding Corporation, a manufacturer of firearms and firearms-related products and accessories, and served as President and Chief Executive Officer of such company from December 2004 until his retirement in September 2011.2011, and currently serves as director of such company. Mr. Golden was employed in various executive positions with the Kohler Company, which manufactures kitchen and bath plumbing fixtures, furniture, tile, engines, and generators, and operates resorts, from February 2002 until December 2004, with his most recent position being the President of its Cabinetry Division. Mr. Golden was the President of Sales for the Industrial/Construction Group of the Stanley Works Company, which manufactures tools and hardware, from 1999 until 2002; Vice President of Sales for Kohler’s North American Plumbing Group from 1996 until 1998; and Vice President, Sales and Marketing for a division of The Black & Decker Corporation, which manufactures tools and hardware, where he was employed from 1981 until 1996. Mr. Golden also serves on the Board of Directors of InfinityQuest Resources Holding Company. He received a B.S. degree in Marketing from Pennsylvania State University and a M.B.A. degree from Emory University.

Mr. Golden was appointed byto the Board upon recommendation of the Nominating/Corporate Governance Committee, onin February 12, 2013 specifically because the CommitteeBoard felt it was important to find and include an additional member with experience as a chief executive officer and experience in growing branded consumer products companies.

Richard E. Posey is retired. He served as President and Chief Executive Officer of Moen Incorporated, a manufacturer of faucets, for six years before retiringfrom January 2002 until his retirement in September 2007. Prior to joining Moen, Mr. Posey was President and Chief Executive Officer of Hamilton Beach / Proctor Silex, Inc., a manufacturer of small kitchen appliances, for five years. Mr. Posey began his career at S.C. Johnson & Son, a supplier of cleaning and other household products, where for 22 years he served in a series of increasingly responsible management positions, both overseas and in the U.S., culminating with Executive Vice President, Consumer Products, North America. Mr. Posey is a Founding Trustee, Virginia Commonwealth University School of Engineering Foundation. He received a B.A. degree in English from The University of Southern California and ana M.B.A. degree from The University of Michigan.

Mr. Posey was appointed by the Board upon recommendation of the Nominating/Corporate Governance Committee, onin May 6, 2009 specifically because the Committee felt it was important to find and include a member with consumer product experience. Mr. Posey was primarily chosen due to his professional experience as a chief executive of a number of consumer product companies, and his experience in sales and marketing of consumer products.

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Directors Whose Terms Expire in 20142017

Name		Age				Director Since
Jay M. Gratz			62				2007
Ronald W. Kaplan			63				2008
Gerald Volas			60				2014

Jay M. Gratz has served as the Chief Financial Officer of VisTracks, Inc., an application enabling platform service provider, since March 2010, and a director of such company since April 2010. Mr. Gratz was a partner in Tatum LLC, a national executive services and consulting firm that focuses on the needs of the Office of the CFO between February 2010 and March 2010. From October 2007 through February 2010, Mr. Gratz was an independent consultant. From 1999 through October 2007, Mr. Gratz served as Executive Vice President and Chief Financial Officer of Ryerson Inc., a metals processor and distributor, and as President of Ryerson Coil Processing Division from November 2001 until October 2007. Mr. Gratz served as Vice President and Chief Financial Officer of Inland Steel Industries, a steel company, from 1994 through 1998, and served in various other positions, including Vice President of Finance, within that company since 1975. Mr. Gratz is a Certified Public Accountant. He received a B.A. degree in economics from State University of New York in Buffalo and an M.B.A. degree from Northwestern University Kellogg Graduate School of Management.

Mr. Gratz was nominated byappointed to the Nominating/Corporate Governance CommitteeBoard in 2007 specifically because the CommitteeBoard felt it was important to find a member with extensive financial experience. Mr. Gratz was nominated by the Committee because he wasis a Certified Public Accountant, served as a chief financial officer of another respected public company, and hadhas experience dealing with a wide-range of financial issues that the Committee felt would beBoard feels is beneficial to the Company. Mr. Gratz wasIn addition, the Board also chosen because the Committee believed that Mr. Gratz could potentially serve as Chairman of the Audit Committee in the future.future (in which position he is now currently serving).

Ronald W. Kaplan has served as Chairman, President and Chief Executive Officer of the Company since May 2010. From January 2008 to May 2010, Mr. Kaplan served as President and Chief Executive Officer of the Company. From February 2006 through December 2007, Mr. Kaplan served as Chief Executive Officer of Continental Global Group, Inc., a manufacturer of bulk material handling systems. For 26 years prior to this, he was employed by Harsco Corporation, an international industrial services and products company, at which he served in a number of capacities, including as Senior Vice President-Operations, and, from 1994 through 2005, as President of Harsco’s Gas Technologies Group, which manufactures containment and control equipment for the global gas industry. He received a B.A. degree in economics from Alfred University and an M.B.A. degree from the Wharton School of Business, University of Pennsylvania.

Mr. Kaplan was hired by the Company in January 2008 as its President and Chief Executive Officer. The Nominating/Corporate Governance CommitteeBoard believed that the BoardCompany at that time would greatly benefit from someone with extensiveprior professional experience as a chief executive officer of manufacturing companies, including experience leading companies through financial and believedoperational “turnarounds”, which the Board felt was important experience for the Company at that time. Mr. Kaplan was appointed to the Board in 2008 because the Board believes that the Chief Executive Officer of the Company should serve on the Board. Therefore,

Gerald Volas has been employed by Masco Corporation, one of the world’s leading manufacturers of brand-name products for the home improvement and new home construction industries, in various positions of increasing responsibility since 1982. Since February 2005, he has served as a Group Executive responsible for almost all of Masco’s operating companies at one time or another. He currently is responsible for a number of Masco operating companies accounting for approximately 50% of Masco’s revenues in 2013. From April 2001 to February 2005, he served as President of Liberty Hardware, a Masco operating company, from January 1996 to April 2001, he served as a Group Controller supporting a variety of Masco operating companies, and from May 1982 to January 1996, he served in progressive financial roles including Vice President/Controller at BrassCraft Manufacturing Company, a Masco operating company. Mr. KaplanVolas is a Certified Public Accountant. He received a Bachelor of Business Administration degree from the University of Michigan.

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Mr. Volas was nominated byappointed to the Nominating/Corporate Governance CommitteeBoard in 2008 due toMarch 2014 because of his professional experience as a chiefan executive of a number of manufacturing companies, including leading companies through financial and operational “turnarounds”, which the Committee felt was important experience for the Company at that time.

Directors Whose Terms Expire in 2015

Frank H. Merlotti, Jr. has served as President of the Coalesse business unit of Steelcase, Inc., a manufacturer of office furniture and furniture systems, since October 2006, and as President of Steelcase North America from September 2002 through September 2006. Mr. Merlotti served as President and Chief Executive Officer of G&T Industries, a manufacturer and distributor of fabricated foam and soft-surface materials for the marine, office furniture and commercial building industries, from August 1999 to September 2002. From 1991 through 1999, Mr. Merlotti served as President and Chief Executive Officer of Metropolitan Furniture Company, a Steelcase Design Partnership company. From 1985 through 1999, Mr. Merlotti served as General Manager of the Business Furniture Division of G&T Industries.

Mr. Merlotti was nominated by the Nominating/Corporate Governance Committee in 2006 due to his professional experience as a chief executive of a consumer product company, and his experience in sales and marketing of consumer products.

Patricia B. Robinson has been an independent consultant since 1999. From 1977 to 1998, Ms. Robinson served in a variety of positions with Mead Corporation, a forest products company, including President of Mead School and Office Products, Vice President of Corporate Strategy and Planning, President of Gilbert Paper, Plant Manager of a specialty machinery facility and Product Manager for new packaging product introductions. She received a B.A. degree in economics from Duke University and an M.B.A. degree from the Darden School at the University of Virginia.

Ms. Robinson was nominated by the Nominating/Corporate Governance Committee in 2000 as one of the first outside independent directors of the Company due to her professional experience as a President of a consumer products company, and herwith additional specific experience with strategic planningin the home improvement and new product introductions.

As previously reported, commencing on July 8, 2005, two lawsuits, bothhome construction industry. In addition, the Board felt it was important to find a member with extensive financial experience. Mr. Volas is a Certified Public Accountant, and has experience dealing with a wide-range of which sought certificationfinancial issues that the Board feels is beneficial to the Company, and could potentially serve as a class action, were filedChairman of the Audit Committee in the United States District Court for the Western District of Virginia naming as defendants the Company, Robert G. Matheny, a director and the former Chairman and Chief Executive Officer, and Paul D. Fletcher, the former Senior Vice President and Chief Financial Officer. Following agreement by the plaintiffs and the defendants that the two lawsuits should be consolidated, the plaintiffs filed a consolidated class action complaint. The complaints principally alleged that the Company, Mr. Matheny and Mr. Fletcher violated Sections 10(b) and 20(a) of and Rule 10b-5 under the Securities Exchange Act of 1934 by, among other things, making false and misleading public statements concerning the Company’s operating and financial results and expectations. The complaints also alleged that certain directors of the Company sold shares of the Company’s common stock at artificially inflated prices. On October 6, 2006, the District Court granted the Company’s Motion to Dismiss the claim. Two separate derivative lawsuits were filed in the United States District Court for the Western District of Virginia on or about August 5, 2005 naming as defendants Mr. Matheny, Mr. Fletcher, and each of the directors of the Company. The filed complaints were based upon the same factual allegations as the complaints in the class action lawsuits, and alleged that the directors and Mr. Fletcher breached their fiduciary duties by permitting the Company to issue false and misleading public statements concerning the Company’s operating and financial results, and also alleged that directors of the Company sold shares of the Company’s common stock at artificially inflated prices. On December 22, 2005, the two derivative actions were consolidated. On February 19, 2007, the plaintiffs signed a Stipulation of Dismissal dismissing the derivative lawsuits, and on March 26, 2007, the Court issued an Order of Dismissal.future

Board of Directors and Committees of the Board of Directors

The Board currently consists of eightseven directors. Mr. Golden was appointed by the Board, upon recommendation of the Nominating/Corporate Governance Committee, on February 12, 2013. On February 12, 2013, William F. Andrews, whose current term of service on the Board expires on the date of this annual meeting, informed the Board of his decision not to stand for re-election. Immediately following the annual meeting, as a result of Mr. Andrew’s decision not to stand for re-election, the Board shall consist of seven members.

The Board has athree standing committees: the Audit Committee, a standingthe Compensation Committee and a standingthe Nominating/Corporate Governance Committee. The Board held sixfive meetings, the Audit Committee held five meetings, the Compensation Committee held five meetings, and the Nominating/Corporate Governance Committee held four meetings during the Company’s 20122014 fiscal year. During 2012,2014, each director attended at least 75% of the aggregate of the total number of meetings of the Board and of each committee of the Board on which such director served.served, other than Mr. Brunner, who retired from the Board effective the date of the 2014 annual meeting on April 30, 2014.

It is the Company’s policy that all directors should attend the annual meetings of the Company’s stockholders. All of the directors attended the annual meeting of stockholders in 2012.2014, other than Mr. Brunner, who retired from the Board effective the date of the annual meeting.

The Board does not have a strict retirement age for directors. However, the Board does believe that once a director attains a certain age, the Board should carefully consider whether such director’s continued service on the Board is in the best interests of the Company. Accordingly, in December 2012, the Board amended theThe Company’s Corporate Governance Principles to provide that at the adjournment of each annual meeting of stockholders, any director who is then age 75 or older shall tender his or her resignation to the Board, at which time the Board may elect to either accept such resignation or request that such director continue to serve on the Board. Mr. Brunner, will be age 77 if elected at thiswho was 78 years old on the date of the 2014 annual meeting. However,meeting of stockholders, did submit his resignation to the Board has indicated to Mr. Brunner that it will not accept his resignation aton such date, and the adjournment of this annual meeting and shall request that Mr. Brunner continue to serve on the Board.Board accepted it.

Board Leadership Structure and Risk Oversight

Our board leadership structure is currently composed of a combined Chairman of the Board of Directors and Chief Executive Officer, a Lead Independent Director, an independent Audit Committee Chairman, an independent Compensation Committee Chairman, and an independent Nominating/Corporate Governance Committee Chairman. Mr. Kaplan is the Company’s President, Chief Executive Officer and Chairman of the Board, and he was hired by the Company in January 2008. Mr. Kaplan has served as President and Chief Executive Officer since January 2008, and Chairman since the retirement in May 2010 of Andrew U. Ferrari, the former Chief Executive Officer of the Company. After careful consideration and considering Mr. Kaplan’s strong leadership since he joined the Company in January 2008, theBoard. The Board determined it appropriate for theto appoint Mr. Kaplan Chairman and the CEOin addition to be the same individual following Mr. Ferrari’s retirement. In making this determination, the Board also consideredbeing Chief Executive Officer in May 2010 after considering the relative size of the Company, the size of the Board and the fact that all remaining members of the Board are independent. The Board believes that having a combined role enhances the ability to provide insight and direction on important strategic initiatives to both management and the Board and increases the likelihood that the Company acts with a common purpose. Separating the roles would potentially result in less effective management and governance processes through undesirable duplication of work and, in worst case, lead to a blurring of the current clear lines of accountability and responsibility. The Company’s overall corporate governance policies and practices adequately address any governance concerns raised by the dual CEO and Chairman role. In addition, the Board determined that there are other members of the executive management team that are well versed in all aspects of the Company and who are familiar with the roles and responsibilities of the Chairman/CEO in the event that the Chairman/CEO is unavailable.

Mr. Gratz isserved as the Company’s Lead Independent Director and he is currently serving auntil April 2014, at which time his two year term of two years, which ends May 2014.office expired. Mr. Gratz is an experienced former public company Executive Vice President and Chief Financial Officer. In April 2014, the Board appointed Mr. Merlotti the Company’s Lead Independent Director for a term of two years, which ends in 2016. Mr. Merlotti is an experienced former chief executive officer. (For additional information regarding Mr. Gratz’s and Mr. Merlotti’s professional experience, please see “Proposal 1—1

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— Election of Directors”.) As our Lead Independent Director, and pursuantPursuant to the Company’s Corporate Governance Principles, the responsibilities of the Lead Independent Director may include: presiding at executive sessions of the independent directors; presiding at Board meetings in the absence of the Chairman; making recommendations and consulting with management with regard to Board meeting agendas, materials and schedules; and serving as a liaison between the independent directors and members of senior management.

Our Board also has three key committees: the

Each of these committees plays an important role in the governance and leadership of our Board and each is chaired by an independent director with significant business experience.

The Board of Directors’ Role in Risk Oversight. Our Board recognizes the importance of effective risk oversight in running a successful business and in fulfilling its fiduciary responsibilities to the Company and its stockholders. While the Chairman and Chief Executive Officer and other members of our senior leadership team are responsible for the day-to-day management of risk, our Board is responsible for ensuring that an appropriate culture of risk management exists within the Company and for setting the right “tone at the top,” overseeing our aggregate risk profile, and assisting management in addressing specific risks, such as strategic and competitive risks, financial risks, brand and reputation risks, legal risks, regulatory risks, and operational risks.

The Board believes that its current leadership structure best facilitates its oversight of risk by combining independent leadership, through the Lead Independent Director, independent board committees, and majority independent board composition, with an experienced Chairman and Chief Executive Officer who has intimate knowledge of our business, history, and the complex challenges we face. The Chairman and Chief Executive Officer’s in-depth understanding of these matters and involvement in the day-to-day management of the Company uniquely positions him to promptly identify and raise key business risks to the Board, call special meetings of the Board when necessary to address critical issues, and focus the Board’s attention on areas of concern. The Lead Independent Director, independent committee chairs and other directors also are experienced professionals or executives who can and do raise issues for Board consideration and review, and are not hesitant to challenge management. The Board believes there is a well-functioning and effective balance between the Lead Independent Director, non-executive independent board members and the Chairman and Chief Executive Officer, which enhances risk oversight.

The Board exercises its oversight responsibility for risk both directly and through its three standing committees. Throughout the year, the Board and each committee spend a portion of their time reviewing and discussing specific risk topics. The full Board is kept informed of each committee’s risk oversight and related activities through regular oral reports from the committee chairs, and committee meeting minutes are available for review by all directors. Strategic, operational and competitive risks also are presented and discussed at the Board’s quarterly meetings, and more often as needed. On at least an annual basis, the Board conducts a review of our long-term strategic plans and members of senior management report on our top risks and the steps management has taken or will take to mitigate these risks. In addition, atAt each quarterly meeting, or more often as necessary, the General Counsel updates the Board on material legal and regulatory matters. On a regular basis between Board meetings, our Chairman and Chief Executive Officer provides written and/or oral reports to the Board on the critical issues we face and recent developments in each of our principal operating areas. These reports include a discussion of business risks as well as a discussion regarding enterprise risk. In addition, at each quarterly meeting, or more often as necessary, the General Counsel updates the Board on material legal and regulatory matters.

The Audit Committee is responsible for reviewing the framework by which management discusses our risk profile and risk exposures with the full Board and its committees. The Audit Committee meets regularly with our Chief Financial Officer, independent auditor, internal auditor, General Counsel, and other members of senior management to discuss our major financial risk exposures, financial reporting, internal controls, credit and

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liquidity risk, compliance risk, and key operational risks. The Audit Committee meets regularly in separate executive sessions with the independent auditor and internal auditor, as well as with committee members only, to facilitate a full and candid discussion of risk and other issues.

The Compensation Committee is responsible for overseeing human capital and compensation risks, including evaluating and assessing risks arising from our compensation policies and practices for all employees and ensuring executive compensation is aligned with performance. The Compensation Committee also is charged with monitoring our incentive and equity-based compensation plans, including employee pension and benefit plans.plans, reviewing and retaining compensation advisers, and considering the results of the say-on-pay vote and determine what adjustments, if any, are necessary or appropriate for the Company to make to its compensation policies and practices in light of such vote.

The Nominating/ Corporate Governance Committee oversees risks related to our overall corporate governance, including Board and committee composition, Board size and structure, Board compensation, director independence, and our corporate governance profile and ratings. The Committee also is actively engaged in overseeing risks associated with succession planning for the Board and management.

Director Independence. The Board has affirmatively determined that all of the current directors, other than Mr. Kaplan, who is the Company’s Chairman, President and Chief Executive Officer, are “independent” of the Company within the meaning of the rulesindependence guidelines governing companies listed on the New York Stock Exchange, or “NYSE”. For a director to be “independent” under the NYSE rules,guidelines, the Board must affirmatively determine that the director has no material relationship with the Company, either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company.

The Board has adopted the following categorical standards of independence to assist it in determining whether a director has a material relationship with the Company. The following relationships between a director and the Company will not be considered material relationships that would preclude a finding by the Board that the director is independent under the NYSE rules:guidelines:

Consistent with the NYSE rules,guidelines, the Company’s corporate governance principles require the Company’s non-management directors to meet at least once each quarter without management present and, if the group of non-management directors includes any director who is not independent under NYSE rules,guidelines, to meet at least once each year with only the independent directors present. During 2012,2014, all of the Company’s non-management directors were independent under NYSE rules.guidelines. The Company’s non-management directors held five executive sessions in 2012.2014. Mr. Gratz (prior to April 2014) and Mr. Merlotti (subsequent to April 2014), as Lead Independent Director, acted as presiding director for each such executive session of non-management directors, and was responsible for advising the Chairman of the Board of decisions reached, and of recommendations for action by the Board made, at each such meeting.

Audit Committee. The Audit Committee of the Board is a standing committee composed of four non-employee directors who meet the independence and expertise requirements of the NYSE listing standards. Pursuant to SEC rules, the Board has designateddetermined that Jay M. Gratz, Paul A. Brunner as its(who retired effective April 30, 2014), and Gerald Volas are “audit committee financial expert,experts,” as such term is defined for purposes of Item 407 of Regulation S-K promulgated by the SEC, and isare independent of management. The Audit Committee which held sixfive meetings during 2012, currently2014. Between January 1 and April 30, 2014, the Audit Committee

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consisted of Mr. Brunner, who was the Chairman, Mr. Golden, Mr. Gratz and Mr. Posey. Subsequent to April 30, 2014, the Audit Committee consists of Mr. Brunner,Gratz, who is the Chairman, Mr. Gratz,Golden, Mr. MerlottiPosey, and Mr. Posey.Volas.

The Audit Committee operates under a written charter that is reviewed annually. The Audit Committee is responsible, among its other duties, for engaging, overseeing, evaluating and replacing the Company’s independent registered public accounting firm, pre-approving all audit and non-audit services by the independent registered public accounting firm, reviewing the scope of the audit plan and the results of each audit with management and the independent registered public accounting firm, reviewing the internal audit function, reviewing the adequacy of the Company’s system of internal controls over financial reporting and disclosure controls and procedures, reviewing the financial statements and other financial information included in the Company’s annual and quarterly reports filed with the SEC, and exercising oversight with respect to the Company’s code of conduct and ethics and other policies and procedures regarding adherence with legal requirements. The Audit Committee has the authority to retain and terminate any third-party consultants and to obtain advice and assistance from internal and external legal, accounting and other advisers. The Audit Committee is authorized to delegate its authority to subcommittees as determined to be necessary or advisable. A current version of the Audit Committee charter is available through the Company’s web sitewebsite at www.trex.com.www.trex.com/our-company/corporate-governance/committees-charters/.

Compensation Committee. The Compensation Committee of the Board is a standing committee composed of four non-employee directors who meet the independence requirements of the NYSE listing standards. The Compensation Committee which held five meetings during 2012,2014. The Compensation Committee currently consists of Mr. Andrews,Posey, who is the Chairman, Mr. Gratz, Mr. PoseyMerlotti and Ms. Robinson. Mr. Posey became a member of the Compensation Committee on May 2, 2012, and Mr. Merlotti, who was formerly a member of the Compensation Committee, ceased to be a member of the Compensation Committee on May 2, 2012.

The Compensation Committee operates under a written charter that is reviewed annually. Pursuant to its charter, the principal functions of the Compensation Committee are to review, determine and approve the

compensation and benefits of the Company’s Chief Executive Officer, or “CEO,” and the other executive officers named in the Summary Compensation Table following the Compensation Discussion and Analysis section of this proxy statement, or “named executive officers,” as well as Vice Presidents who report directly to the CEO, and to administer the Company’s employee benefit programs, including its 20052014 Stock Incentive Plan (formerly the “2005 Stock Incentive Plan”), 1999 Employee Stock Purchase Plan, annual cash incentive plan, long-term equity incentive plan, and other incentive compensation plans, benefits plans and equity-based plans.

The Compensation Committee has the authority to retain and terminate any third-party compensation consultant and to obtain advice and assistance from internal and external legal, accounting and other advisers. (See theCompensation Discussion and Analysis section of this proxy statement for information regarding the practices of the Compensation Committee, including the role of the executive officers and the Compensation Committee’s compensation consultant in determining or recommending the amount and form of compensation paid to the named executive officers.) The Compensation Committee is authorized to delegate its authority to subcommittees as determined to be necessary or advisable. A current version of the Compensation Committee charter is available through the Company’s web sitewebsite at www.trex.com.www.trex.com/our-company/corporate-governance/committees-charters/.

Nominating/Corporate Governance Committee. The Nominating/Corporate Governance Committee of the Board is a standing committee composed of four non-employee directors who meet the independence requirements of the NYSE listing standards. The Nominating/Corporate Governance Committee which held fivefour meetings during 2012, currently consists of Ms. Robinson, who is the Chairman, Mr. Andrews, Mr. Brunner2014. Between January 1 and Mr. Merlotti. Mr. Merlotti became a member ofApril 30, 2014, the Nominating/Corporate Governance Committee on May 2, 2012,consisted of Mr. Merlotti, who is Chairman, Mr. Brunner, Mr. Golden and Mr. Posey, who was formerly a member ofMs. Robinson. Subsequent to April 30, 2014, the Nominating/Corporate Governance Committee ceased to be a memberconsists of the Nominating/Corporate Governance Committee on May 2, 2012.Mr. Merlotti, who is Chairman, Mr. Golden, Ms. Robinson and Mr. Volas.

The Nominating/Corporate Governance Committee operates under a written charter that is reviewed annually. The Nominating/Corporate Governance Committee is responsible for recommending candidates for

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election to the Board and for making recommendations to the Board regarding corporate governance matters, including Board size and membership qualifications, Board committees, corporate organization, non-employee director compensation, succession planning for officers and key executives, programs for training and development of executive-level employees, and stockholder proposals regarding these matters. The Nominating/Corporate Governance Committee has the authority to retain and terminate any search firm engaged to identify director candidates, and to obtain advice and assistance from outside counsel and any other advisors, as it deems appropriate in its sole discretion. The Nominating/Corporate Governance Committee is authorized to delegate its authority to subcommittees as determined to be necessary or advisable. A current version of the Nominating/Corporate Governance Committee charter is available through the Company’s web sitewebsite at www.trex.com.www.trex.com/our-company/corporate-governance/committees-charters/.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee was an officer or employee of the Company or any subsidiary of the Company during 2012.2014. There are no interlock relationships as defined in the applicable SEC rules.

Director Nominations Policy

The Board has, by resolution, adopted a director nominations policy. The purpose of the nominations policy is to set forth the process by which candidates for possible inclusion in the Company’s recommended slate of director nomineesdirectors are selected. The nominations policy is administered by the Nominating/Corporate Governance Committee of the Board.

The Board does not currently prescribe any minimum qualifications for director candidates. Consistent with the criteria for the selection of directors approved by the Board, the Nominating/Corporate Governance Committee will take into account the Company’s current needs and the qualities needed for Board service, including experience and achievement in business, finance, technology or other areas relevant to the Company’s activities; reputation, ethical character and maturity of judgment; diversity of viewpoints, backgrounds and experiences; absence of conflicts of interest that might impede the proper performance of the responsibilities of a

director; independence under SEC and NYSE rules; service on other boards of directors; sufficient time to devote to Board matters; ability to work effectively and collegially with other Board members; and diversity. In considering the diversity of candidates, the Committee considers an individual’s background, professional experience, education and skill, race, gender and/or national origin. In the case of incumbent directors whose terms of office are set to expire, the Nominating/Corporate Governance Committee will review such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance and any transactions of such directors with the Company during their term. For those potential new director candidates who appear upon first consideration to meet the Board’s selection criteria, the Nominating/Corporate Governance Committee will conduct appropriate inquiries into their background and qualifications and, depending on the result of such inquiries, arrange for in-person meetings with the potential candidates.

The Nominating/Corporate Governance Committee may use multiple sources for identifying director candidates, including its own contacts and referrals from other directors, members of management, and Trex Company’s advisers, and executive search firms. The Committee will consider director candidates recommended by stockholders and will evaluate such director candidates in the same manner in which it evaluates candidates recommended by other sources.advisers. The Nominating/Corporate Governance Committee has used in the past, and may use in the future, the services of an executive search firm to help identify candidates for directors who meet the qualifications outlined above. The search firm screens the candidates, conducts reference checks, prepares a biography of each candidate for committee review and assists in arranging interviews. In identifying Mr. Volas as a candidate for nomination to the Board in March 2014, the Nominating/Corporate Governance Committee retained the executive search firm, Russell Reynolds Associates.

The Committee will also consider director candidates recommended by stockholders and will evaluate such director candidates in the same manner in which it evaluates candidates recommended by other sources. In making recommendations for director nominees for the annual meeting of stockholders, the Nominating/Corporate Governance Committee will consider any written recommendations of director candidates by

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stockholders received by the Secretary of the Company no later than 120 days before the anniversary of the previous year’s annual meeting of stockholders. Recommendations must include the candidate’s name and contact information and a statement of the candidate’s background and qualifications, and must be mailed to Trex Company, Inc., 160 Exeter Drive, Winchester, Virginia 22603-8605, Attention: Secretary.

The nominations policy is intended to provide a flexible set of guidelines for the effective functioning of the Company’s director nominations process. The Nominating/Corporate Governance Committee intends to review the nominations policy as it considers advisable and anticipates that modifications may be necessary from time to time as the Company’s needs and circumstances evolve, and as applicable legal or listing standards change. The Nominating/Corporate Governance Committee may amend the nominations policy at any time.

The Company’s bylaws provide that any stockholder wishing to nominate persons for election as directors at an annual meeting must deliver to the Secretary of the Company at the Company’s principal office in Winchester, Virginia a written notice of the stockholder’s intention to make such a nomination. The stockholder generally is required to furnish the notice no earlier than 120 days and no later than 90 days before the first anniversary of the preceding year’s annual meeting. The notice must includecontain the following information: (1) such information regarding each proposed nominee as would be required to be disclosed under SEC rules and regulations in solicitations of proxies forby the election of directors in an election contest or otherwise; (2) the written consent of each proposed nominee to serve as a director of the Company; and (3) as to the stockholder giving the notice and the beneficial owner, if any, of common stock on whose behalf the nomination is made, (a) the name and address of record of such stockholder and the name and address of such beneficial owner, (b) the class and number of shares of the Company’s capital stock that are owned beneficially and of record by such stockholder and such beneficial owner, (c) a representation that the stockholder is a holder of record of the Company’s capital stock entitled to vote at such meeting and intends to appear, in person or by proxy, at the meeting to propose such nomination, and (d) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group that intends to (A) deliver a proxy statement or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to elect the nominee, or (B) otherwise solicit proxies for stockholders in support of such nomination. The Company may require any proposed nominee to furnish such other information as the Company may reasonably require to determine the eligibility of such proposed nominee to serve as a director of Trex Company.bylaws.

Communications with the Board of DirectorsDirectors; Reporting Questionable Accounting, Internal Accounting Controls and Auditing Matters

The Board welcomes communications from its stockholders and other interested parties and has adopted a procedure for receiving and addressing those communications. StockholdersSecurity holders and other interested parties may communicate any concerns they may have about the Company directly and confidentially to either the full Board toor the non-management directors as a group, or to anyan individual director, at the following address:by writing to: “Board of Directors” or “Non-Management Directors” or Name of Individual Director, Trex Company, Inc., 160 Exeter Drive, Winchester, VirginiaVA 22603-8605, Attention: Secretary. A stockholderSecretary, or other interested party may also callby calling the Company’s governance hotline at 1-800-719-4916.Governance Hotline (800-719-4916). An independent third-party vendor maintains the Company’s governance hotline, and all calls are forwarded to the Chairman of the Audit Committee, the Company’s Secretary and the Company’s Chief Financial Officer.Governance Hotline. To maintain the caller’s anonymity, calls are passed through proprietary filters to “mask” the caller’s voice and the originating phone number is removed from the associated audio file. A caller wishing to be identified may indicate his or her name in the message. IfAll calls are forwarded to the Trex Secretary and Chief Financial Officer. The Secretary then reviews and forwards all communications to the Board member or members that the caller wishes to submit relevant documents, the documents should be mailed to the following address: Trex Company, Inc., 160 Exeter Drive, Winchester, Virginia 22603-8605, Attention: Secretary. The Company’s Secretary will review and forward all stockholder communications and other communications from interested parties to the intended recipient,designates, except for those communications that are outside the scope of Board matters or duplicative of other communications previously forwarded to the intended recipients. The Secretary will retain copies of all communications and maintain a record of whether the communications were forwarded and, if not, the reason why not.

Any individual, whether an employee or third party, may report to the Audit Committee any information relating to questionable accounting, internal accounting controls and auditing matters by writing to Trex Company, Inc., Audit Committee Chairman, c/o Woods Rogers PLC, 901 East Byrd Street, Suite 1550, Richmond, VA 23219, or by calling the applicable person.Company’s Governance Hotline. As stated above, an independent third-party vendor maintains the Governance Hotline, and to maintain the caller’s anonymity, calls are passed through proprietary filters to “mask” the caller’s voice and the originating phone number is removed from the associated audio file. A caller wishing to be identified may indicate his or her name in the message. All calls are forwarded to the Chairman of the Audit Committee. If anyone wants to submit relevant records, they should be mailed to the above address.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers and persons who own more than 10% of the Company’s common stock to file with the SEC and the NYSE initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. The reporting persons are required by rules of the SEC to furnish the Company with copies of all Section 16(a) reports they file. Based solely upon a review of Section 16(a) reports furnished to the Company for fiscal 20122014 or written representations that no other reports were required, the Company believes that the foregoing reporting persons complied with all filing requirements for fiscal 2012.2014.

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Availability of Bylaws, Corporate Governance Principles, Code of Conduct and Ethics, and Committee Charters

The Company makes available on its web sitewebsite at www.trex.com and in paper form without charge, copies of its bylaws, corporate governance principles, its code of conduct and ethics, and the charters of each standing committee of its Board. Requests for copies of these documents should be directed to Trex Company, Inc., 160 Exeter Drive, Winchester, Virginia 22603-8605, Attention: Secretary.

Director CompensationDIRECTOR COMPENSATION

Non-employee directors of the Company receive cash and stock-based compensation under the Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors, or “Outside Director Plan.” The Outside Director Plan is administered by the Nominating/Corporate Governance Committee. All stock-based(The Outside Director Plan provides that all equity grants awarded as compensation to non-employee directorsissued under such Plan are issued underpursuant to the Trex Company, Inc. 2014 Stock Incentive Plan, or “2014 Stock Incentive Plan” (formerly the Trex Company, Inc. 2005 Stock Incentive Plan, or “2005 Stock Incentive Plan,”Plan), which was approved by stockholders at the Company’s 20052014 annual meeting.

The Nominating/Corporate Governance Committee is responsible for making recommendations to the Board regarding non-employee director compensation. In accordance with this authority, the Nominating/Corporate Governance Committee utilizedutilizes the Compensation Committee’s independent compensation consultant, Hay Group, in 2012 to advise the Nominating/Corporate Governance Committee on matters related to director compensation. Hay Group’s engagement with the Company does not create any conflicts of interest with any of Hay Group’s existing or former clients.

The Company’s director compensation program was reviewed by Hay Group in 2012, and such review indicated that the non-employee directors’ total annual compensation (consisting of cash and stock-based compensation) was approximately at the 25^th percentile of the Company’s peer group. (See discussion of our peer

group under the “Benchmarking” section ofCompensation Discussion and Analysis under “How do we determine executive pay.”) Based upon the Nominating/Corporate Governance’s desire to have director compensation approximate the median of its peer group, Hay Group provided pay level and pay structure alternatives for the Committee’s consideration. Based on Hay Group’s analysis, the Board approved certain modifications to the Outside Director Plan in July 2012. Such modifications were as follows:

As a result of these modifications, the elements of the non-employee director compensation package under the Outside Director Plan, which were last modified in February 2015, are as follows:

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The Outside Director Plan as amended in 2012, is designed to deliver annual cash compensation at the median, and equity compensation slightly above the median, of the Company’s peer group. The Outside Director Plan as amended, is designed to deliver compensation approximately 50% in cash and 50% in equity (assuming a director does not elect to receive additional equity in lieu of cash, as discussed above), with the objective of appropriately balancing the pay of non-employee directors for their service while linking their compensation closely to returns to stockholders through the potential for enhanced value from future stock price appreciation. Directors are also reimbursed for actual travel expenses.

The Company’s director compensation program was reviewed by Hay Group in 2012, and such review indicated that the non-employee directors’ total annual compensation (consisting of cash and stock-based compensation) was approximately at the 25^th percentile of the Company’s peer group. Based upon the Nominating/Corporate Governance Committee’s desire to have director compensation approximate or slightly exceed the median of its peer group, the Board approved certain modifications to the Outside Director Plan in July 2012. (The Outside Directors Plan, as modified, is described above.)

In 2014, the Nominating/Corporate Governance Committee asked Trex Company’s Senior Vice President, General Counsel and Secretary, to review the director compensation program, and to benchmark the compensation against Trex Company’s peer group and similarly sized public companies. The peer group companies used for such benchmarking were selected in July 2014 by the Compensation Committee, with input from Hay Group, and are as follows:

Based on such benchmarking, the Nominating/Corporate Governance Committee determined that the Outside Director Plan delivers annual cash compensation and equity compensation at approximately the median of the Company’s peer group, and accordingly, no modifications to the Outside Directors Plan were made.

The Company does not provide pensions, medical benefits or other benefit programs to non-employee directors.

In 2013, the Board adopted Stock Ownership Guidelines applicable to non-employee directors, pursuant to which each non-executive director is required to own and hold, as a minimum, that number of shares of the Company’s common stock having a market value of at least 3 times the director’s annual cash retainer. For purposes of the guidelines, common stock includes shares of common stock no matter how acquired (i.e., vesting

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of restricted shares or purchased on the open market), and unvested restricted shares. Directors have 5 years from the adoption of the guidelines or 5 years from becoming a director, whichever occurs later, to comply with the ownership requirements. Notwithstanding, each director meets the current minimum requirements other than Mr. Volas, who was appointed to the Board in March 2014.

In 2013, the Board also adopted, on a voluntary basis and in advance of final Dodd-Frank Act hedging rules, an Anti-Hedging and Anti-Pledging Policy that applies to non-employee directors. This policy prohibits our directors from purchasing any financial instrument or entering into any transaction that is designed to hedge or offset any decrease in the market value of Company equity (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, or exchange funds), or pledging, hypothecating, or otherwise encumbering Company equity as collateral for indebtedness.

(See discussion inCompensation Discussion and Analysis under the “Stock Ownership Guidelines” and “Anti-Hedging and Anti-Pledging Policy” sections under “Additional Information on Our Program.” for discussion of the Stock Ownership Guidelines and Anti-Hedging and Anti-Pledging Policy as applicable to our executive officers.)

The table below shows compensation paid to the non-employee directors for their service in 2012.2014.

20122014 DIRECTOR COMPENSATION

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20122014 DIRECTOR EQUITY AWARDS

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COMPENSATION DISCUSSION AND ANALYSIS

Introduction

This section describes the Company’s compensation program for its Chief Executive Officer (“CEO”), its Chief Financial Officer (“CFO”), and its threefour other mostly highly compensated executive officers for fiscal year 2012,2014, all of whom are referred to collectively as its “named executive officers.” For fiscal 2012,2014, the Company’s named executive officers were:

This Compensation Discussion and Analysis focuses on the material elements of our executive compensation program in effect for the 20122014 fiscal year. It also provides an overview of our executive compensation philosophy and why we believe the program is appropriate for the Company and its stockholders. Finally, we discuss the Compensation Committee’s methodology for determining appropriate and competitive levels of compensation for the named executive officers. Details of compensation paid to the named executive officers can be found in the tables below.

Our executive compensation program is intended to align our named executive officers’ interests with those of our stockholders by rewarding performance that meets or exceeds the goals the Compensation Committee establishes with the objective of increasing stockholder value. In line with our pay for performance philosophy, the total compensation received by our named executive officers will vary based on individual and corporate performance measured against annual and long-term performance goals. Our named executive officers’ total compensation is comprised of a mix of base salary, annual cash incentive compensation and long-term equity incentive awards.compensation.

Executive Summary

The following is a summary of actions taken by the Board and Compensation Committee in or with respect to 2014, all of which are discussed in further detail below:

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2014 Say on Pay Results and Considerations

The Company provides its stockholders the opportunity to cast an annual non-binding advisory vote on executive compensation (a “say-on-pay proposal”). The Company and the Company’s Compensation Committee consider the outcome of the Company’s say-on-pay proposal when making future compensation decisions for the executive officers of the Company. In connection with the Company’s 20122014 annual meeting of stockholders, the proposal to approve the executive compensation of the Company’s executive officers named in the Company’s proxy statement dated March 23, 201221, 2014 received 11,820,62413,907,945 votes in favor, or 96.7%96.9% of votes cast. Although these votes are advisory (and therefore not binding on the Company), the Company and the Compensation Committee carefully review these results each year and consider them, along with other communications from stockholders relating to our compensation practices, in making future compensation decisions for executive officers of the Company.

Compensation Philosophy and Objectives

What person or group is responsible for determining the compensation levels of named executive officers?

The Role of the Compensation Committee. The Compensation Committee, pursuant to its charter, reviews, determines and approves the compensation, including base salary, and annual and long termlong-term incentive compensation, of the Company’s CEO and the other named executive officers, as well as Vice Presidents who report directly to the CEO. Additionally, the Compensation Committee administers the Company’s employee

benefit programs, including its 2014 Stock Incentive Plan (formerly, the 2005 Stock Incentive Plan,Plan), 1999 Employee Stock Purchase Plan, annual cash incentive plan, long-term equity incentive plan, and other incentive compensation plans, benefit plans and equity-based plans.

The Role of Consultants. The Compensation Committee has the authority to retain and terminate any third-party compensation consultant and to obtain advice and assistance from internal and external legal, accounting and other advisers. The Compensation Committee has the authority to compensate its outside advisers without obtaining approval of the Board. In accordance with this authority, the Compensation Committee retained Hay Group in 20122014 as the committee’s outsideindependent compensation consultant to advise the Compensation Committee on matters related to CEO and other named executive officer compensation. The Compensation Committee assessed Hay Group’s engagement withwork as required under rules of the Company doesSecurities and Exchange Commission and concluded that it did not createraise any conflicts of interest with any ofand that Hay Group’s existing or former clients.Group was independent within the NYSE’s listing standards.

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The consultant’s assignments are determined by the chairman of the Compensation Committee. At the request of the chairman, the current consultant assists in developing the peer group of companies and compensation surveys to be used for the competitive analyses, prepares the market analysis of both named executive officer and board compensation, prepares a financial analysis of the Company’s performance vis-à-vis the peer group and analyzes the relationship between CEO pay and company performance, constructs market competitive ranges of pay opportunity for base salaries, annual cash incentive compensation targets, and long-term equity incentive awards for named executive officers, and reviews the annual cash incentive compensation and long-term equity incentive plans for linkage to key business objectives and company performance. The consultant advises the Compensation Committee as to the compensation of officers of the Company, but does not recommend any specific pay level changes for named executive officers.

The Role of Executives. The Company’s CEO and Chief Administrative Officer,Senior Vice President, General Counsel and Secretary, or “CAO,“GC,” are actively involved in the executive compensation process. Historically, the CEO reviews the performance of each of the named executive officers (other than his own performance) and, within the defined program parameters, recommends to the Compensation Committee base salary increases and annual cash incentive compensation and long-term equity incentive awards for such individuals. He provides the Compensation Committee with both annual and long-term recommended financial performance goals for the Company that are used to link pay with performance. The CEO also provides his views to the Compensation Committee and the consultant with respect to the executive compensation program’s ability to attract, retain and motivate the level of executive talent necessary to achieve the Company’s business goals. The CAOGC works with the CEO to develop the recommended base salary increases, annual cash incentive compensation levels and long-term equity incentive awards, and provides analysis on the ability of the executive compensation program to attract, retain, and motivate the Company’s executive team and potential executive hires. The CEO and the CAOGC attend the meetings of the Compensation Committee, but do not participate in the Compensation Committee’s executive sessions.

What are the Company’s executive compensation principles and objectives?

The Compensation Committee believes that the structure of the compensation program for named executive officers should be designed to attract, motivate, and retain key talent to promote the long-term success of the Company, and to balance these objectives with a strong link to stockholder return and other measures of performance that drive total stockholder return.

The Company’s overall executive compensation philosophy is that pay should be competitive with the relevant market for executive talent, be performance-based, vary with the attainment of specific objectives, and be closely aligned with the interests of the Company’s stockholders. The core principles of the Company’s executive compensation program include the following:

higher or lower than the Company’s target market position. The Compensation Committee regularly utilizes the assistance of a compensation consultant to provide information on market practices, programs, and compensation levels.

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The CEO and the Compensation Committee regularly review the executive compensation program and philosophy to assess whether the program promotes the objectives of enabling the Company to attract and retain exceptionally talented executives and to link total compensation to the Company’s ability to meet its annual financial and non-financial goals and, in the longer term, to produce enhanced levels of total stockholder return. Based on such reviews, programmatic changes have been implemented at various times to enhance consistency of the various compensation elements with the program’s philosophy.

How do we determine executive pay?

Benchmarking: Benchmarking in comparison to the peer group (see below) is one of several factors considered in the compensation process but is not in and of itself determinative. The relative position of individual named executive officers in comparison to the peer group is based on their respective competencies, experience and performance. While the Company does not establish executive pay based solely on benchmarking data, we believe that our pay levels and practices should be within a range of competitiveness with theour peer group and benchmarking provides us with an assessment of reasonableness and competitiveness. To that end, the Company generally views the median of the market as a reference point against which to evaluate the competitiveness of its target total direct compensation. However, each individual’s actual compensation is based on numerous factors including the individual’s level of experience in the role and the annual and long-term performance of both the Company and the individual.

The Compensation Committee benchmarks target total direct compensation, which consists of base salary, target annual cash incentive compensation, and the value of long-term equity incentives to the competitive marketplace, including to a peer group of companies (the “peer group”). The Compensation Committee benchmarks its named executive officer compensation because the Compensation Committee believes this is the best way to determine whether such compensation is competitive with the Company’s labor market for executive talent.

As discussed below, the Compensation Committee adjusted the peer group in June 2012. Prior to such adjustment, the peer group consisted of the following companies:

Peer Group:In June 2012,July 2014, Hay Group reviewed the Company’s existing peer group and provided the Compensation Committee with a set of considerations for change, including proposed additions and deletions to the peer group. Based on Hay Group’s analysis, the Compensation Committee refined its peer group taking into account a number of factors for each potential peer company including, but not limited to, size (revenues, market capitalization and number of employees), nature of business (business comparators and similar customer base), organizational complexity and business model (span and scope of the organization), competition for executive talent (organizations from which executives may be recruited to and from) and location. While all of the aforementioned factors are taken in account, Hay Group considers the most important to be size and competition for executive talent as these provide the most meaningful insight into competitive practices.

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In June 2012,July, 2014, with input from Hay Group, the Compensation Committee identified a publicly-traded peer group consisting of the following fifteen companies:

In December 2012,October 2014, Hay Group completed an executive compensation benchmarking study. Hay Group assessed the Company’s executive compensation program against the peer group both with respect to competitiveness and mix of the elements of compensation. Hay Group compared the following elements of compensation of the Company against the peer group for 20112013 (the last reported compensation for the peer group): (1) base salary; (2) target total cash compensation (base salary plus target annual cash incentive compensation); and (3) target total direct compensation (base salary plus target annual cash incentive compensation plus the value of long termlong-term equity incentive compensation). Based on such comparison, Hay Group determined that the Company’s respective elements of target compensation compared against the peer group (as a weighted average of the six NEOs) were as follows:

With respect to the mix of target compensation for the named executive officers, Hay Group found that the Company grants a higher percentage of variable compensation (annual cash incentivesincentive compensation and long-term equity incentives)incentive compensation) and a lower percentage of fixed compensation (base salary), compared to total compensation, than the

peer group. This means that a higher percentage of the Company’s named executive officers’ compensation is “at risk” than the peer group. This is consistent with one of the majorcore principles of the Compensation Committee; namely, that a material portion of the executive officers’ total compensation should be dependent on performance.

Hay Group also compared these elements of compensation on an actual basis for 2011,2013, and determined that the Company’s respective elements of actual compensation compared against the peer group (as a weighted average of the six NEOs) were as follows:

Actual total cash compensation and actual total direct compensation was substantially belowabove median for 20112013 because the executive officers only received 16.15%155.8% of their target payout for the annual cash incentive plan due to financial performance that was substantially belowabove plan in 2011.2013. This again highlights the Company’s focus on pay for performance.

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In order to gauge performance in the context of total stockholder return or “TSR”, Hay Group compared the Company’s TSR to eachthe peer group companycompanies and determined that the Company substantially outperformed relative to the peer group. Hay Group analyzed both 1- and 3-year TSR and their analysis showed that the Company’s performance ranked at the 8594^th and 9385^rdth percentile of the peer group, respectively (as of OctoberApril 30, 2012)2014).

The Company’s TSR in 2014 continued to outperform relative to our peer group. During calendar year 2014, the Company’s stock price increased by 7.1%, which was in excess of the average of the peer group for 2014, which was 4.4%. This was on top of a significant outperformance in 2013, when the Company’s stock price increased by 113.6%, compared to 56.3% for the peer group. Over the two-year period of 2013 and 2014, the Company’s stock price increased by 128.8%, compared to a return of 58.1% for the Company’s peer group and 48.7% for the S&P 500.

Given these results, we believe our compensation program aligns with the core principles described above, namely pay for performance, and supports the Company’s competitive pay positioning relative to peers.

What are the elements of executive compensation, why do we use these elements, how are the elements’ values determined, and, if applicable, what are the mechanics of each program?

Base Salary

Base salary is annual fixed cash compensation, and is a standard element of compensation, necessary to attract and retain talent, and provides fixed compensation that an employee can rely upon for his or her ordinary living expenses. Base salary is the principal non-variable element of the Company’s total compensation program.

Base salaries reflect each named executive officer’s responsibilities, the impact of each named executive officer’s position, and the contributions each named executive officer delivers to the Company.

Base salaries are determined by competitive levels in the market, based on the Company’s peer group and the results of executive compensation surveys, for executives with comparable responsibilities and job scope. Base salary increases, if any, are based on individual performance, market conditions and company performance. To gauge market conditions, the Compensation Committee evaluates the peer group and market data compiled by its consultant. Base salaries are set following review of this data upon consideration of the named executive officer’s experience, tenure, performance, and potential.

In December 2011,2013, the Compensation Committee approved a 2.5% increase in the 20122014 base salaries for the named executive officers.officers, other than Mr. Gerhard and Mr. Zambanini, who each received a 5% increase. The Compensation Committee considered information publicly available on the prevalent levels of base salary increases for local companies and industrial companies, and made these adjustments based on what it determined to be appropriate.

In December 2012,October 2014, as discussed above, Hay Group completed an executive compensation benchmarking study of the Company’s executive compensation. TheIn December 2014, the Compensation Committee approved a 2.5%3.0% increase in the 20132015 base salaries for the named executive officers. Hay Group advised the Compensation Committee that such percentage increase was slightly below planned 2013 fiscal year increases in the industrialofficers, based on an internal analysis of prevailing market and industry of 3%. conditions.

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The base salaries of the named executive officers for 20122014 and 20132015 are as follows:

Annual Cash Incentive Compensation

The annual cash incentive plan provides named executive officers with the opportunity to gain financially from the Company’s financial results that they help to generate annually. The annual cash incentive plan provides for a cash payment based on the achievement of annual corporate financial goals.

We believe that it is necessary to provide annual cash incentive compensation, because short-term incentives provide an immediate benefit paid in cash based on the achievement of immediate results, thereby promoting the achievement of short-term goals. A performance-based incentive motivates management to enhancefocus on the short-term (one fiscal year) financial resultsgoals in specific targeted areas determined at the beginning of each year.

For the named executive officers, the Company provides an annual cash incentive payment based 75% on achievement of a certain pretax income target, and 25% on achievement of a certain free cash flow target, in each case excluding any items determined by the Compensation Committee to be extraordinary and not considered in the establishment of such targets. Free cash flow is defined as net cash provided by operating activities less net cash used in investing activities, including expenditures for property, plant and equipment. PretaxThe pretax income and free cash flow financial performance metrics were chosen as metrics because the Compensation Committee determined that they would best measure the Company’s financial performance for the fiscal year.year and align managements’ financial incentives to those of its stockholders. Management deems pre-tax earnings to be the key factor to increasing shareholder value, which is indicative of its 75% weighting toward the annual cash incentive plan. Management believes that free cash flow complements pre-tax earnings to ensure the Company’s operating and strategic objectives are being adequately funded as a result of meeting its profit objectives, which is indicative of its 25% weighting towards the annual cash incentive plan. The free-cash-flow financial metric also serves as a guideline to meeting management’s target capital structure.

The Compensation Committee uses a sliding scale to determine both the pretax income portion of the annual cash incentive and the free cash flow portion of the annual cash incentive. The minimum threshold for any payment under both the pretax income element and the free cash flow element of the annual cash incentive plan for 20122014 was 50%80% of the respective targets, which would result in a payout of 50% of the target payment, and the maximum payout was capped at 200% of the target payment if 200%120% or more of the target was achieved. These performance ranges were selected based upon the Company’s business judgment while acknowledging the potential variability in results given some of the unique challenges in our business. Each year, the Company

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determines its performance ranges based upon the best available information and makes an informed decision as to where the threshold, target and maximum performance levels should be set. As explained in more detail below, these performance ranges were established for the 20122014 plan year and have been modified for 2013. Between the minimum threshold and the maximum payout, the amounts change in a linear fashion.

Once calculated, the targetTarget awards are expressed as a percentage of the named executive officer’s base salary. Cash incentive targets for 20122014 were 100% for the CEO, and 60% to 70%75% for the other named executive officers, depending on the named executive officer’s grade level. The total award to any single named executive officer was capped at 200% of the named executive officer’s targeted percentage of salary.

Determination of Target Levels. The Compensation Committee believes that using pretax income and free cash flow financial targets as the basis for the executive annual cash incentive plan effectively aligns executive interests with the interests of the Company’s stockholders. An annual cash incentive can be earned if the Company meets its financial goals as measured using pretax income and free cash flow as adjusted to reflect core operating performance. The annual financial objectives are contained within the Company’s annual financial plan, which is approved by the Board each December prior to the start of the new fiscal year. The Company’s financial-metric based approach established for the annual cash incentive plan applies to the broader management team as well as the executive officers to ensure that there is consistency with the essence of the “pay for performance” structure of the incentive plan.

Calculations of Pretax Income Target and Payout for 20122014. For the 20122014 fiscal year, the Compensation Committee set target pretax income at $9,273,000. $74,510,000. The Compensation Committee considered this target challenging given the set of circumstances including the macro-economic and competitive environments known at the time. In addition, the 2014 pre-tax income target was substantially higher (76%) than the 2013 pretax income target because the Compensation Committee believed the Company was well positioned for substantial growth in pretax earnings.

The Compensation Committee specifically defined suchthe pretax income target to exclude any items determined by the Compensation Committee to be extraordinary and not considered in the establishment of such target. To illustrate the sliding scale grid:

Numbers falling within the ranges above are interpolated on a straight line basis.

As stated above, the Compensation Committee agreed to exclude from the actual pretax income calculation for 20122014 certain items that it determined were extraordinary and not considered in the establishment of the pretax income target for the year. For 2012,2014, the Committee agreed to exclude an increasea $1,471,000 charge related to subleased office space in Dulles, Virginia, $302,000 in expenses associated with the settlement of a class action against the Company related to mold growth and color variation/fading, and $150,000 in unplanned expenses associated with a Board of Directors requested study on executive succession planning. The Compensation Committee excluded these items because they were not included in the 2014 Financial Plan which was approved by the Board in December 2013. The Compensation Committee concluded that it would not be appropriate to penalize management for these items when they were not considered in the establishment of the pretax income target and given that a majority of the expenses principally relate to product sold and actions taken prior to the warranty reserve for decking material manufactured at Trex Company’s Nevada plant prior to mid-2006, of $21,487,000. current senior management team assuming responsibility in early 2008.

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The net effect of the adjustmentadjustments described in the two preceding paragraphs was to increase the pretax income for 2014 for incentive purposes by $21,487,000$1,923,000 from $3,729,000$66,948,000 to $25,216,000. The $25,216,000$68,871,000. This equated to 92.4% of pretax income was above the threshold fortarget, which resulted in a 200% payout.payment multiple of 81.17%. This 200%percentage was then multiplied by 75%, which is the percent weight given to the pretax target portion of the annual cash incentive, to equal 150%60.88% for pretax income achievement.

Calculations of Free Cash Flow Target and Payout for 2012.2014. For the 20122014 fiscal year, the Compensation Committee set target free cash flow at $19,044,000. $45,534,000. Similar to the pretax income target, this was substantially higher (30%) than the 2013 free cash flow target. The Compensation Committee believed the Company’s growth in earnings would also result in an increase in free cash flow.

The Compensation Committee specifically defined suchthe free cash flow target to exclude any items determined by the Compensation Committee to be extraordinary and not considered in the establishment of such target. To illustrate the sliding scale grid:

ActualNumbers falling within the ranges above are interpolated on a straight line basis.

As stated above, the Compensation Committee agreed to exclude from the actual free cash flow calculation for 2014 certain items that it determined were extraordinary and not considered in the establishment of the free cash flow target for the year. For 2014, actual reported free cash flow was adversely affected by a $10,300,000 adjustment for excess tax benefits related to the exercise of SARs and options and the vesting of restricted stock that occurred as a result of an increase in the share price from the date the original awards were granted. Such adjustment had no effect on overall total cash flow for 2014 since an offsetting adjustment was included in the “financing” section of the cash flow statement (which is not included in the free cash flow line). Given that actual cash flow was not affected by this adjustment and given that such adjustment was not considered in the establishment of the free cash flow target, the Compensation Committee concluded that it would not be appropriate to penalize management for this adjustment.

The net effect of the adjustment described in the preceding paragraph was to increase free cash flow for 2012 was $52,959,000,2014 for incentive purposes by $10,300,000 from $45,769,000 to $56,069,000. This equated to 124% of target, which was above the threshold forresulted in a payment multiple of 200% payout.. This 200%percentage was then multiplied by 25%, which is the percent weight given to the free cash flow target portion of the annual cash incentive, to equal 50% for free cash flow achievement.

Total Cash Incentive Payout Percentage. As a result of the above calculations, the cash incentive for 20122014 to the executive officers was paid at a blended rate of 200%110.88% of target, which was determined as follows:

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This blended rate was then multiplied by the cash incentive target for each executive officer, as described above. Actual payouts to each named executive officer in February 2015, as a percentage of base salary, were:

Determination of Target Levels. The performance metrics of the Company’s planned pretax income and free cash flow for the 2012 fiscal year were strongly related to the creation of total stockholder value. Both the pretax income and free cash flow targets for 2012 were set at a level that represented reasonable targets given the 2011 actual financial results of the Company, and macroeconomic conditions affecting the economy in general, and homebuilding and home remodeling in particular.

Plan Structure and Target Levels for 20132015 Annual Cash Incentive Plan. In October 2012, Hay Group reviewed the design of the Company’s annual cash incentive plan, comparing the Company’s plan against prevailing market practices, including the peer group and other survey sources. Overall, Hay Group concluded that the Company’s annual cash incentive plan was well-aligned with competitive market practices on all material design features and supported the Company’s compensation philosophy in light of its business strategy and objectives. Based upon Hay Group’s review and our ability to more accurately forecast performance results in the coming year, we narrowed the performance range at both threshold and maximum performance levels. Given that we will have better visibility into 2013 performance results, the threshold and maximum levels of performance were adjusted to 80% and 120%, respectively, with no changes to the threshold and maximum payout levels of 50% and 200%, respectively.

In December 2012,2014, the Compensation Committee established the pretax income and free cash flow targets for 2013,2015, consistent with the Company’s internal Financial Plan approved by the Board in December 2014, with pretax income again being weighted at 75% and free cash flow weighted at 25%. The Compensation Committee specifically defined such targets to exclude any items determined by the Compensation Committee to be

extraordinary and not considered in the establishment of such targets. As noted above,program mechanics for the 2013 annual cash incentive plan, the minimum performance threshold for any payment under both the pretax income element and the free cash flow element of the2015 annual cash incentive plan will be 80% of the respective targets,same as they were for the 2014 annual cash incentive plan, which will resultis discussed in a payout of 50% of the target payment, and a maximum payout capped at 200% of the respective target payments if 120% or more of the respective target is achieved. Between the minimum threshold and the maximum payout, the amounts change in a linear fashion.detail above.

Long-Term Equity Incentive Compensation

We believe that long-term equity incentive compensation provides appropriate motivational tools to achieve certain long-term company goals. The long-term equity incentive compensation plan is designed to align named executive officers’ interests with those of stockholders, motivate the named executive officer team to achieve key financial goals and reward superior performance. The design of the program helps to reduce turnover and to retain the knowledge and skills of the Company’s valued employees. In structuring the amount of long-term equity incentive compensation awards, the Compensation Committee seeks to balance such awards and the interests of the Company’s stockholders under a policy that moderates the dilutive effects of annual equity-based awards against the need to provide attractive and competitive incentive compensation.

Under the long-term equity incentive compensation plan of the Company, grants consist of 50% time-based restricted shares, and 50% performance-based restricted shares, as further described below.

Elements of Long-Term Equity Incentive Compensation:

Stock Appreciation Rights (SARs).Stock Appreciation Rights, or “SARs,” are grants which, upon exercise, give the holder the right to receive the net appreciation in market value of a specified number of shares of our common stock over a grant price. Upon exercise, the net appreciation over the base price is settled in an equivalent number of common shares valued on the exercise date. SARs are similar to stock options but are less dilutive because only a net number of shares are issued. With respect to SARs, the grant price is the closing market price of the Company’s common stock on the NYSE on the grant date. The SARs have a three-year vesting period, vesting one-third each year. The number of SARs issued is based on the approved target dollar amount of SARs to be awarded, divided by the value of one SAR, which is equal to the Black-Scholes value of an equivalent stock option.

SARs motivate executive efforts to achieve results that produce long-term increases (since executives have up to 10 years to exercise their SARs) in common stock market price. The three-year SAR vesting period encourages named executive officers to work with a long-term view of the Company’s performance and reinforces their long-term affiliation with the Company. Named executive officers receive value in the SAR grants only when the share price increases above the grant price, which strengthens their alignment with stockholder interests.

Time-Based Restricted Shares.Restricted Time-based restricted shares are Company common stock that cannot be sold or transferred during the vesting period. The restricted shares have a three-year vesting period, vesting one-third each year. The number of restricted shares issued is based on the approved target dollar amount of restricted stock to be awarded, divided by the fair market value of the Company’s common stock on the date of the grant.

Restricted

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Time-based restricted shares facilitate retention by providing guaranteed in-the-money value if the named executive officer remains with the Company over the vesting period. In addition, time-vestedtime-based restricted stock provides immediate alignment with stockholders through current stock ownership.ownership, and the potential for future growth.

Performance-Based Restricted Shares. Performance-based restricted shares are similar to time-based restricted shares, but the number of shares that will vest, if any, is based on Company financial performance. The performance-based restricted shares have a three-year vesting period, vesting one-third each year based on performance against target earnings before interest, taxes, depreciation and amortization, or “EBITDA,” for 1 year, cumulative 2 years and cumulative 3 years, respectively, in each case excluding any items determined by the Compensation Committee to be extraordinary and not considered in the establishment of such targets.

The target number of performance-based restricted shares issued is based on the approved target dollar amount of such shares to be awarded, divided by the fair market value of currentthe Company’s common stock ownership may riseon the date of the grant. With respect to each vesting, the number of shares that will vest will be between 0% and 200% of the target number of shares. The Compensation Committee will use a sliding scale to determine the percentage of the target shares that will vest each year. The minimum threshold for any vesting will be 80% of the EBITDA target, which will result in a payout of 50% of the target vesting, and the maximum payout will be capped at 200% of the target vesting if 120% or fallmore of the target is achieved.

To illustrate the sliding scale grid:

Numbers falling within the ranges above are interpolated on a straight line basis.

In addition to facilitating retention, performance-based restricted shares also more effective and provide a more immediate retention tool than the possibility of long-term future rewards.

2012 Long-Term Equity Incentive Awards.Underclosely align the long-term equity incentive compensation plan with the Company’s pay for performance philosophy. The number of shares that will vest each year is contingent upon performance against pre-determined EBITDA targets. If the Company achieves less than 80% of the Companytarget for grants in 2012, the grants consisted of 50% SARs and 50% time-based restricted shares. We believe that the use and mix of these two long-term incentive vehicles balances the needs of the Company between retention and performance and aligns theany year, no shares will vest. This vesting condition encourages named executive officers to work with stockholders given that any value ultimately recognized is dependent upon the valuea long-term view of the Company’s stock.performance and reinforces their long-term affiliation with the Company.

The award agreements for both time-based restricted shares and performance-based restricted shares provide that if a participant’s employment with the Company is terminated due to death, permanent and total disability, retirement, by the Company without “cause,” or by the participant with “good reason” (with “cause” and “good reason” being defined in the award agreements), any unvested restricted shares held by a participant at termination will vest (with performance-based restricted shares vesting at target levels).

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2014 Long-Term Equity Incentive Compensation Awards.The target levels for the 20122014 grants were the same asmade in 2011:February 2014 were 200% of base salary for the CEO and 115% to 135%145% of base salary for the other named executive officers, depending on the officer’s grade level, and were split equally between time-based restricted shares and SARs.performance-based restricted shares. The award of both time-based and performance-based restricted shares in 20122014 was conditioned on the attainment in 20112013 of positive pretax earnings, excluding certain items determined by the Compensation Committee to be extraordinary and not considered in the establishment of such target, while the award of SARs was not conditioned upon the attainment of any company performance target. (The Compensation Committee considers that SARs are “performance based” by definition in that the value of SARs are dependent on an increase in the share price from the date of grant of the SAR to the date of its exercise.)

Although theThe Company did not earn positive pretax earnings in 2011, even excluding an extraordinary increase to the warranty reserve for decking material manufactured at the Company’s Nevada plant prior to 2007 of $9,975,000, and certain other extraordinary items totaling $454,000, the Compensation Committee determined that but for the extraordinary weakness in the economy in 2011 and poor weather conditions in the early part of the year, both of which significantly depressed Company revenues, the Company would have achieved positive pretax earnings. The Committee also wanted to recognize superior performance by the management team despite the adverse factors, including but not limited to improved manufacturing efficiencies, including specifically with respect to the Company’s new Transcend^® product line, and market share gains in the non-wood decking and railing segment. When adjusting for these extraordinary events, the Compensation Committee used its permitted discretionary authority to grant2013, so the restricted stock awards were made at the target levels.

Actual awards to each named executive officer of long-term equity incentive compensation in February 2014, as a percentage of base salary, split evenly between time-based restricted shares and performance-based restricted shares, were as follows: